What Explains Real and Nominal Exchange Rate Fluctuations? Evidence from SVAR Analysis for India

Takeshi Inoue and Shigeyuki Hamori

No 216, IDE Discussion Papers from Institute of Developing Economies, Japan External Trade Organization(JETRO)

Abstract: This study empirically analyzes the sources of the exchange rate fluctuations in Indiaby employing the structural VAR model. The VAR system consists of three variables,i.e., the nominal exchange rate, the real exchange rate, and the relative output ofIndia and a foreign country. Consistent with most previous studies, the empiricalevidence demonstrates that real shocks are the main drives of the fluctuations in realand nominal exchange rates, indicating that the central bank cannot maintain the realexchange rate at its desired level over time.

Keywords: Exchange Rate; India; RBI; SVAR; India; Foreign Exchange (search for similar items in EconPapers)
JEL-codes: E31 F31 (search for similar items in EconPapers)
Date: 2009-10-01
New Economics Papers: this item is included in nep-cba, nep-cwa, nep-ifn, nep-mac, nep-mon and nep-opm
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Citations: View citations in EconPapers (5)

Published in IDE Discussion Paper = IDE Discussion Paper, No. 216. 2009-10-01

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Journal Article: What Explains Real and Nominal Exchange Rate Fluctuations?: Evidence from SVAR Analysis for India (2009)
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